I guess I would draw an analogy for the petroleum and gas fired electricity industries. In general, the spot price tends to be paid on only a small amount of the feed to any larger consumer of this item at any given time, whether corn, soy, canola, crude oil or natural gas. Maybe some corn to EtOH facilities buy 100% of their feed and all of their natural gas on the spot market, but that is just maximizing risk. When buying "bits and pieces" of natural gas at various futures market prices, the spot price can be significantly buffered. It is done that way by large purchasers of Ngas, and doing that with corn could lower the feed price by a couple of dollars/bushel. It could also lower the cost of the Ngas used at such facilities. Oil refineries do this same thing - they buy various quantities of oil for delivery at future dates, and thus hedge their risk. Not too many buy only spot market priced oil 100% of the time.

For EtOH manufacturers who don't hedge their risks of wild swings in the spot prices for both corn and Ngas, things don't look so good.. But by buffering these raw material prices, an EtOH producer could lower production costs by close to 10 to 20 %, which is enough to keep going until the market corrects itself. Or until changes in the plant get made so that Ngas usage gets sliced in half (worth about 25 cent/gallon at current EtOH/Ngas prices).

So what is keeping corn prices so high? Well, many things, and just removing any one of them will lower domestic corn prices, and thus take away some of the current high price for corn, which seems to be pretty high for those making corn this year. My pick cause for high demand for corn is from overseas purchases of corn to feed animals with. Due to the devaluation of the dollar, Europe, Japan and China (with Euro currency)can buy up U.S. corn really cheap to them, but at what seem like high prices to us. This "bargain" corn then gets fed to their cows, pigs and chickens, etc to make food in a typically wasteful way, since most of the corn fed to animals gets burped and tooted into CO2 and Methane (starch portion), and a lot of the protein goes "down the drain" as urea, the yellow aqueous solution.

There is a relatively simple solution - put a varying modest export tax on corn, but no export tax on DDGS and DDG, which also work very nicely as animal feed, minus the starch/sugar, which most animals in feedlot type situations don't need - they don't get much exercise, after all. This way the Federal government gets some extra bucks, sales of DDGS for animal food remain unmolested (even the corn oil can be taken out), and corn prices drop somewhat on the domestic market, and the EtOH producers can keep their economics in balance. Remember, without those EtOH facilities, gasoline prices will go up to $5.35 from the current $4.25, and quite likely a lot more, then corn demand will drop, and corn prices will drop like a lead balloon, well below the cost of production.

But anyway, these super-high corn prices are also driven by exports from the U.S. to wealthy countries, some of whom have lots of money to burn (we gave it to them). They can do fine buying DDGS instead of corn to feed to their animals.

The other culprit to these ultra-high corn prices is the feeding of about 5/8 of the non-exported corn crop to domestic animals. Those animals need to go on a starch diet, IMHO.

Nb41